Wednesday, April 27, 2005

No Rush Likely Needed to Preserve Our Retirement Benefits

From Anonymous:

Subject - No Rush Likely Needed to Preserve Our Retirement Benefits

Colleagues:

I did some reading on benefits in the government literature and on the competition web site. My conclusion is that it is highly unlikely that we will lose anything that we already have, and it is likely that we will continue to accrue benefits in a competitive fashion with the rest of industry (or better if UC wins). With an extension, we will have the opportunity to add another year to UCRP even in the worst case, so I'm sitting still for the rest of this year. The only way we lose big is if UC decides not to compete and refuses to manage our retirement funds in the future, so let's try to help avoid these. We should be able to guess what the most likely scenario is in the next few weeks anyway.

If you noticed, the modified RFP presented the concept that LANL employees would be allowed to become inactive members of UCRP while becoming new members of the contract manager's retirement plan. If UC wins, it is still likely that no changes will occur. If UC loses, it is likely that we will retain what we have in UCRP and join a new defined contribution plan for acquisition of additional benefits. This is the lowest cost solution for the government and the contractor and is now standard in industry and the DOE/NNSA. The GAO is pushing DOE towards defined contribution plans because, with the exception of UC and a few others, the vast majority of these plans in the country are under-funded and thus creating growing future liabilities for the federal government, meaning the taxpayers. Some other things from the reading:

DOE had $13.4B in unfunded contractor future liabilities in 2003 according to a GAO report (attached). This includes both pension and retiree health care. The causes - stock market, rising health care costs, DOE accepting optimistic projections rather than resume contributing to some plans, lack of tax incentives for annuity-based insurance for retiree health care, and boomers beginning to retire.

The GAO found that according to DOE's own statistics, 44% of its post-retirement health care costs are above market typical, and 29% of its defined benefit costs are above typical, even though the complex average total benefits were typical. The GAO singled these two types of plans out for more specific management oversight.

DOE principally uses pay-as-you-go for retiree health care because of the lack of tax incentives to induce contractors to use annuities, for which no proven algorithm yet exists anyway and which the contractors are resisting.

DOE typically passes post-retirement costs on to the next contractor, or else pays the old contractor to continue managing them, thus increasing their operations costs as contracts are re-competed. Defined contribution plans are preferred for the future since these can move with the employee, eliminating this growing cost as contracts are re-competed.

Fortune 100 companies are typically carrying $1.3B in liabilities for post-retirement benefits. Because their retiree health care costs have increased by >200% in recent years, they are moving to annuities, which bound their costs but do no necessarily cover retiree costs (UC retirees should expect this eventually also as it is the only solution gaining traction). They have to do this for their balance sheets as these are reportable liabilities. Also, they typically use defined contribution plans for other retirement benefits.

[“If UC wins, it is still likely that no changes will occur.”] You obviously did not do enough research or you would realize DOE is trying force a new and different UC posture, perhaps in the form of an LLC or something similar. DO NOT believe that if UC chooses to bid and wins that it will be business as usual for the benefits and pension. DOE is looking to cut costs and the RFP and subsequent white papers have made it very clear they are going after benefits and pension as a “cash cow”. Why do you think they are NOT considering benefits packages and pension plans as part of the criteria for awarding the contract?

You also did not notice that the RFP states that if you choose to keep your funds in UCRP, you will treated as a new employee, zeroing out your accumulated years of service.

Also, the revised RFP no longer requires all current employees to be retained by the new contractor.

The Wall Street Journal has had several interesting articles on a national trend by businesses to get out of the "burden" of paying retirees the benefits under which they retired, and to get rid of defined benefit plans altogether. Part of this strategy is to define benefits so that when contracts change the retiree benefits are viewed as under the new contract. Lots of very worrisome wording in the revised RFP that indicates new surprises may lie in store for us at the next contract change.

Gary- If the contract is extended for a complete year you will certainly be better off. If however the contract is not extended a complete year the benifits package will change and If you are able, you are most likly better off leaving befor the end of June and retireing on July 1st. This way you will recieve a COLA July 1st 2005, and another one July 1st 2006. I plan on retireing June 24 and coming back as a new employee when the new contractor is in place. I believe I will be rehired because my management has not hired anyone to replace me and has requested I stay as a contract employee.

Look at United Airlines, those poor folks just lost 75% of there retirement benifits. I feel that my retiremebt is safer with UC than with any of the private contractors who are bidding this contract. Especially with DOE willing to fine them for any number of reasons and taking most of there profit away. You need to look no further than Rocky Flats.

The poster of "No Rush" is extremely ill informed. Who made this post?Someone from upper management at LANL? The dam is about to break inregards to retirements at LANL, and for good reason. People need toprotect their vested UC pension and benefits. This post reads like a poorly researched propaganda piece to hold back the dam.

I have read the DOE recompete site information and talked to many people at the Lab. There are two schools of thought -

1. Like the initial poster, "no real problem".

2. The previous poster, "the sky is falling".

Each of these opinions is a personal judgment based on the DOE info and general considerations. There is no written report or DOE web posting that I am aware of that confirms one or the other approaches. If anyone has a factual source to help decide this important issue, please post it. Thanks!

Next group of people HR will likely see are those trying to lock up UC as "inactive". Those people will probably wait until the last minute. This is the topic of conversation among those in the 40 to early 50s age group.

Judging by the comments I have heard - they will take a long, hard, skeptical look at any pension rollover proposals. Many are willing to lock it up even if means having to find another job. Many have substantial amounts waiting for them at about age 56 or 57 if they go inactive.

They all seem to echo something someone stated in a previous comment:

"Stating the obvious perhaps - one thing that has come out in the blog and offline, is that justified or not, and whether they write about it or not, a large number of people simply do not trust LANL upper management, NM politicians, DOE/NNSA, UC, LM, NG, local business interests, NM's Senators, and the US Congress, to look out for their interests."

Do you guys ever read anything before you FLAME someone. The poster was right, we'll know a lot more in a couple of weeks. This post also helped me understand the balancing act that the source evaluation board must consider and why the RFP is taking so long.

Like the thread suggested last week, most of you guys attack first and see a future filled only with threats. I feel sorry for you. I want to stay informed, but don't worry about the things I can't control. I'll make my decision when the time comes and I have real information, not the speculative hysteria of people afraid of change.

I did appreciate the "HR will trap us here" threat. Novel. Also irrational, but I do appreciate the creativity.

You guys can do your best to keep yourself stuck in fear and anxiety, but that's not for me, I've got a life to live and its too short to spend it here.

Like the others last week - I'm outta here!!! Enjoy feeling bad if you want to.

Warning- US pension guarantee tops out at about $20,000 per year (ask all the retired pilots from failed airlineswhat they are living on now.) The RFP is much more ominous that the original poster states. You lose either way if you become 'inactive'

Have you considered that the UCRS funds when transferred to a separate may be an irresistable incentive for the bidders? Can they borrow against them? DOE may even need these funds to offset losses from other DOE sites... (Hanford?) So don't be so sure that no one wants to get their hands on large amounts of LANL employee's money... Money always brings interest.

In about 1990, CERN borrowed form the employees' retirement fund to finish LEP2. This was done at an interest rate that was below what the fund had been earning on its investments. Carlo Rubia was director at the time. The employees staged a one-day strike that accomplished absolutely nothing. I was present at CERN at the time.

I’ve spent time at LANL and I’ve been reading this Blog for a few weeks. I think that I can make a helpful suggestion. First of all, the LANL employees are not unusual in fixating both on salaries and pensions. What has gone wrong is nothing to do with Nanos but I’m not surprised at the enthusiastic condemnation of his direction. You’ve had it good at Los Alamos. Funding has come to LANL without real peer review. Program folly and fiasco is and was concealed by secrecy and your senator has come through with funding after repeated failures in competition with other DOE labs. The rest of the nation’s scientists see your lab as a sinkhole of funding. Corrupt, incompetent administrators prosper in such an environment where they can define success and ignore standards of scientific behavior. You will have the lab you want when you compete as equals and don’t accept nonsense programs that have no legitimacy from the first day. Those few who have not sold their soul for a good salary and an enviable pension might work in that lab.

I see no need to invoke Chris Mechel. Take a close look at any failed LANL program with a "name" or ask someone who observed APT, NPB, CALIOPE, ATW, MTI, CALIOPE, ANTARES, JUMPER, BEAR, MTI and lots more. Ask if LLNL has that many failed programs that didn't leave so much as an epitaph. The LANL programs, as a rule, were funded without serious review by those DOE people that we like to revile.

The poster for this article represents the "What me worry" school. Clearly he has not read the current RFP very carefully. The limit on the cost of the benefits package which are well below the cost of the benefits we now have tells me all I need to know. It is also interesting that the new manager will get 100 million per year to manage LANL as opposed to 12.5 million for UC. So, it appears that employee benefits will be cut to pay the corporation ( or LLC if you like) to run LANL. Gee, what a great deal for the corporation! What a rotten deal for the employees. Oh, and how delightful it would be to have a defined contributions package instead of a defined benefits package. Employees now need to learn money management in addition to their fields of expertise, but management gets to pick the company or companies which will manage employee benefits. LANL already has defined contribution programs ( 401k, and others). They did great while the stock market was booming. Now they are doing poorly and have been for a while -- and that is with a huge selection of investment options. Right now, LANL employees don't have to depend on their 401k's for their retirement. They are extra nest eggs for retirement. Imagine when that is all we will have! And this is supposed to make us feel good? It makes me think that LANL employees are being sold a bill of goods by the person who posted this. Defined contributions programs are great for corporations and bad for employees except as add ons to a good pension program. The ideal situation, which is what LANL employees have now, is to have both. Where old age is concerned a belt and suspenders are best.

to 4/27/2005 08:22:53 PM:"Take a close look at any failed LANL program with a "name" or ask someone who observed APT, NPB, CALIOPE, ATW, MTI, CALIOPE, ANTARES, JUMPER, BEAR, MTI and lots more." Ask if LLNL has that many failed programs that didn't leave so much as an epitaph."

Weren't a number of those listed pushed and managed by Cobb (Caliope, Bear, MTI, others?). You are letting LLNL off the hook ... unwarranted they only need one the NIF a huge failue at $XB.

My recollection is that MFTF-B at LLNL cost 500 million to build and was closed the same day it opened. Prior to NIF, that was the biggest project LLNL ever built. LLNL is much worse than LANL when it comes to failed big projects.

Regarding the 4/28/2005 07:50:29 PM, I don't know about all of these projects, but I can state that both APT and BEAR were successful in that these projects delivered equipment that met the technical specifications. As far as cost and schedule, they did fine on an absolute scale. More than anything else dictated cost and schedule. And, as usual, the fuding was never delivered when promised.

As far as NPB, aka "GTA," it had met most of its objectives when peace broke out in the Cold War.

I have read a lot of your postings about what is going on at LANL so now I want you to get a feel for what most of us are talking about at LLNL. Here are some concerns:______________________________Abolishing Academia at Lawrence Livermore National Laboratory

Contract FY 2007To whom it may concern,For the first time in my twenty-two years as an employee of LLNL I can honestly say that the plan to establish a corporation to manage Lawrence Livermore National Laboratory employees is an absolute brilliant venture, if the mission is to restructure the system without fear of law suites.

For me, my only question to the University of California and to DOE is; just how kind will they be to their loyal employees after twenty to thirty years of service when in fact it was their dedication to duty during the cold war era that kept this country free.

For many of us it is imperative that the answer to this question be delivered on time and without procrastination by April of 2007. After all, you are playing with people’s livelihood where vital decisions must be made with extreme precaution.

For my final input to the success or demise of LLNL I am going to leave you with this fact. As of today the July 29th 2005 I have not talked to a single person who was at age fifty that says they are going to stay at LLNL if and when the UC loses the contract. I will wager that you will lose at least 50-60% of your FTE’s on the day before the new contractor takes control. I am one of those, especially after reading the LANL presentation attached.

So with that said I am going tell you what the employees of LLNL believe they are in for. This is what they are anticipating and quite frankly I don’t believe that their worries are far from being the truth.

· All employees including PhD’s to become contract labor- equal rights

· Give the employer an easy path for employee dismissal – not a bad idea

· Reduce the population by at least 50% - promote early retirement

· Moth-ball NIF – not a bad idea and great saving to all

· Transfer the Pu facility to NTS – a great idea

· Make LLNL and Institute not an R&D facility - cost effectiveI cannot say that all of the above bullets are a bad idea. It is true; the labs need to be restructured. If that means a RIF or the termination and closure of large projects such as NIF and the Pu facility then so be it. But please give the people who are fifty year old with twenty years of service a golden handshake before Sept 29th 2007, and above all retain the medial benefits for all. The medical benefits are the MOST important thing one can have.In conclusion I will say this to all I am leaving behind in 2007.

Be happy that you were not working for United Airlines, Enron or General Motor’s.

Please read LANL Contract Proposal found at the below URL. Pay close attention to page 15-second paragraph and page 16.

Personally I think this entire event was though out very well. What better way to get rid of people then to hire a hatchet man and have you leave on your own. This avoids all law suites and who cares about ranking 1-N. Its brilliant.